Plan Advisor Guide to Fiduciary Oversight

One of the biggest parts of a retirement plan advisor’s value proposition is to facilitate fiduciary oversight for a plan sponsor. While most advisors would naturally like to talk about investment lineups and participant education, facilitating fiduciary oversight is going to protect your client from fiduciary liability as well as improve the overall plan
experience.

What is fiduciary oversight and how can advisors implement one as part of their service offering?

Fiduciary oversight is a periodic review of all aspects of the plan to ensure it is operating in the best interest of participant’s and their beneficiaries. While there are no hard-and-fast rules to proper plan oversight, there are fiduciary best practices that can act as a guide. In short, we are building a case for why decisions are being made on behalf of plan participants. The main categories in a proper fiduciary oversight process include: fees and expenses, investment lineup and performance, participation and
retirement outcomes, plan design, and administrative compliance.

Fees and Expenses

A plan sponsor should have a baseline for which to compare their overall plan fees and expenses. A plan advisor can assist by working with service providers who provide a 100% transparent fee structure in an easy to find fee disclosure. Benchmarking a plan’s overall expenses against national averages once every three years is also a fiduciary best practice. There is no “right” or “wrong” answer when it comes to fees, but more about understanding the services you are receiving and whether or not those are
justified by the fees the plan is being charged.

Investment Lineup and Performance

A plan advisor should provide a process for which investment decisions are being made. Past performance is no guarantee of future results so plan sponsors must look at other metrics such as fees, manager tenure, assets under management, risk-adjusted performance, peer category performance, and style drift, among others. Advisors have a wealth of third-party resources, including 3(38) investment management fiduciaries,
who can provide this process for a fee.

Participation and Retirement Outcomes

There are three main levels plan advisors should look at when it comes to participant success:

  • Overall Participation (bronze level): What percentage of eligible participants are actually participating?
  • Percentage of Participants Receiving Full Match (silver level): What percentage of participants are contributing enough to receive the full employer match (if applicable)?
  • Full Income Replacement (gold level): What percentage of participants are on track in having full income replacement throughout retirement?

Ideally, we want to be having conversations with participants about income replacement, but we might start with increasing participation and increasing savings.

Plan Design

Reviewing eligibility requirements, features like Roth contributions, loans, hardship withdrawals, and automatic enrollment and escalation are all elements of plan design. If something is not working well within the plan and can possibly be remedied through plan design changes, those are conversations that need to be happening.

Administrative Compliance

There are certain day-to-day operations that need to be happening on a consistent basis. This includes enrolling newly eligible participants, approving new loan requests and making sure they are being paid on time, participant notices and disclosures are being disseminated on time, making sure contributions are being submitted on time, and all necessary IRS forms are being filled out and submitted on time. If there are issues with these day-to-day items, a plan advisor should consult on how to create internal processes to address these issues.

Document, Document, and then Document Some More

If you don’t write it down, it never happened. Any discussions or reviews you are having with a plan sponsor needs be officially documented and kept somewhere that is easily accessible. If there are any changes made to service providers, investment lineup, plan design, or internal processes, document what the problem was, why the change was made, and when is the next official review of those changes.

RPC Can Help

Don’t feel like you need to recreate the wheel. RPC provides fiduciary oversight resources such as annual plan review checklists, fee benchmarking reports, investment lineup fiduciary score via fi360, participant reports and income replacement calculators, and a team of experts to help address any plan design or administrative compliance
issues. Your review notes can be uploaded into the plan sponsor’s online fiduciary audit binder so that they are easily accessible if someone needs access.

For more questions on how RPC can help with fiduciary oversight, feel free to contact us at 877-800-1114 or sales@retirementplanconsultants.net.